Sydney’s hottest suburbs for home buyers have just changed fast

House values have been surging in western Sydney over the past year, but buyer demand has shifted with the interest rate cut and started to push prices up in more affluent areas.

Values have risen as much as 13 per cent over the past 12 months in parts of the west as buyers with reduced borrowing power have looked for more affordable properties.

House values have surged in western Sydney suburbs over the past 12 months amid affordability pressures.Credit: Nine

But for the past month the league table has been topped by affluent areas such as the eastern suburbs, Mosman and Marrickville, rising up to 3 per cent on CoreLogic data due to the anticipation of February’s rate cut.

Experts said wealthier buyers were sensitive to rate cuts and may have been waiting to purchase at a discount but a new growth phase in March was unexpected due to ongoing affordability challenges.

Fairfield’s median house value rose 13.2 per cent over 12 months, followed by St Marys at 9.6 per cent.

Bankstown, Mount Druitt, Campbelltown and Penrith all rose more than 6 per cent.

CoreLogic research director Tim Lawless said it was not surprising that outer-fringe suburbs outperformed as median incomes could no longer afford the typical home, so buyers were looking further afield.

“If you’re on a median income and looking to buy the median home value with a 20 per cent deposit, you’re going to spend around 50 per cent of your gross annual income to service your mortgage. You can only borrow around the lower quartile buying price,” he said.

“If you’re on a lower income, you will most likely be squeezed out of the market, and it will be very difficult to get your foot in the door.”

Fairfield, Wollondilly, Penrith, Botany and Camden recorded house value growth of up to 1.4 per cent in the three months before February’s rate cut, but some affluent neighbourhoods also began to creep up, such as North Sydney/Mosman and the Marrickville area. Lawless said this was likely due to an expectation of rate cuts and buyers positioning themselves in the market.

“Most people understand it’s going to be a cautious and gradual rate-cutting cycle, so this is more an improvement in sentiment that’s flowing through to more activity in the market,” he said.

However, in February, the fastest-rising suburbs were largely affluent areas. The eastern suburbs, Mosman, Marrickville, Hornsby and the Hawkesbury recorded house value growth of up to 3 per cent.

“Some of these affluent markets are the same ones that saw the largest falls in value,” Lawless said. “Buyers may want to buy now at a discounted value because values may continue to rise as interest rates come down.”

There was a gradual rise in house values in affluent Sydney suburbs such as Mosman before February’s rate cut.Credit: Domain

Eastern suburbs house values fell up to 6.4 per cent from the October peak, while North Sydney/ Mosman recorded a decline of 5.2 per cent from their peak in August.

ANZ economist Madeline Dunk said buyers in affluent suburbs are probably more rate-sensitive.

“A reduction in rates, albeit by only 25 basis points, could have been enough to entice them to get back into the market,” she said.

“The more expensive properties have recorded the largest falls since their peak, and conversely rate cuts may have had a larger influence on their decisions than for other buyers.”

Dunk would be surprised to see growth sustained in March. “Indicators like time on market are still trending upwards, and affordability challenges still persist,” she said.

Sydney Sotheby’s International Realty director Emily Davidson specialises in the eastern suburbs and has seen a slight lift in buyer sentiment.

“Buyers feel more optimistic about their borrowing capacity and the market outlook,” Davidson said. “This has brought interest to our sales campaigns, but we expect further rate cuts will be needed before we see a full return of buyer confidence across the board.”

She noted a moderate increase in engagement at open homes and auctions. Affordability remains a key consideration.

Tom Byrne and his partner have listed their three-bedroom home at 16 Silver Street in Marrickville, where values picked up last month.

The couple bought the home in 2016 and enlisted architect Emily Sandstrom for a renovation that features cathedral ceilings, a loft space and a garden.

They plan to upsize in the same suburb.

“We’re engaged with the market, as we are also looking to buy back into it,” Byrne said. “We check in with our agents to get their insights too.

“Marrickville has great public transport, there’s live music here, good restaurants and bars. It’s magic.”

Tom Byrne is selling his Marrickville home.Credit: Steven Siewert

His agent, BresicWhitney Inner West’s Rhonda Yim, said there had been encouraging numbers at open homes for Silver Street, with interest from young families and couples.

She said the rate cut has resulted in greater buyer sentiment.

“We’ve had a slower auction start to the year,” she said, “but registrations have gone up and bidders are more willing to participate.”